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City Budget Bulletin #5: Labour Costs Part Two

As we pointed out in our last City Budget Bulletin, the City of Edmonton cannot expect to constrain operational spending growth unless it addresses employee costs, which account for 57% of the operating budget.

Last week we focused on holding the line on wages in this round of public sector negotiations. The other strategy the City can use to control labour costs is to limit the number of people employed by the City.

Edmonton’s population has grown considerably in the last decade. The 2006 census reported that Edmonton had 730,372 residents. The most recent census in 2016 shows that Edmonton grew to 932,546 – a 28% increase in ten years. Generally speaking, we would expect government staff to grow at a similar rate to population, although somewhat less given technological advances and economies of scale.  However, total tax-supported municipal staff grew by much more: 44% from 2006-2016.

An observation might be that the massive growth in staffing levels between 2006-2016 was due to a “catching-up” period following austere City budgets and operations in the 1990s. If we look back another decade to 1996, we can see how this perspective holds up.

The number of City workers did decline in the 1990s. The ratio of City workers to Edmontonians was at 1:75 in 1996, but only 1:80 in 2001. By 2006, however, due to significant hiring growth after 1999, the ratio was back to 1:75.  After 2006, as the graphic above indicates, hiring then continued to far outstrip population growth for another decade, driving up property taxes for Edmonton businesses and residents.

This costly hiring trend is not only a matter of having more people in management and the front lines doing the same work but, as earlier City Budget Bulletins have shown, also a matter of the City taking on lines of business that either other orders of government or the private sector could deliver. Our focus on collecting commercial waste and operating recreation centres are just two examples of a broader issue.

Whether it is reducing the scope of operations or improving productivity, the City needs to address its staff growth problem in order to alleviate the tax burden on Edmonton businesses while preserving quality core services.

The City has stabilized this trend in recent years. Employee growth has been 5.2% since 2015. However, we need a more robust approach towards addressing the annual tax burden we now face due to over-hiring practices in the previous decade.

A partial attrition strategy would help streamline new staffing allocations without laying people off or hampering the City’s ability to meet new priorities. The City recently acknowledged this as a viable cost-cutting approach when, faced with a sudden $14.4 million deficit for 2018, Administration announced that “hirings are being restricted to critical positions.” The City should strongly consider maintaining some form of hiring restraint to reduce overall costs throughout the upcoming four-year budget cycle.

We can look to other municipalities for effective medium-term hiring restraint ideas. As an example, in 2014 the City of Montreal took on a strategy of hiring only one new person for every two that quit or retired (not including Fire and Police), thus enabling them to maintain any essential positions on the front lines or elsewhere while reducing spending. Establishing an approach like this ensures we are never merely filling a position simply because it was vacated, but because it is really needed to meet priorities in a culture of restraint.

The potential savings from a measured partial attrition approach are significant.  Assuming 5% of staff quit or leave every year, using this strategy over four years (excluding EMS, Fire, and Police) would help the City return staff numbers per capita closer to the 2006 level.  Even if Montreal’s ‘hire one for every two’ rule was only used for two years, followed by zero net growth for two years, this would reduce staff by 5%. Reducing staff by 5% over four years, instead of increasing it 2% annually, would mean $150 million in annual savings at the end of the four-year cycle, with no layoffs.Questions for the City:

  1. Will the City implement a strategy to restrain hiring throughout the 2019-2022 budget that reduces costs without compromising essential front-line services?
  2. How can the City most effectively improve the productivity and efficiency of its workforce?
  3. Will the City reduce staff levels by exiting lines of business that are better delivered by other orders of government, the non-profit sector, or private businesses?

Let us know what you think of this Bulletin and, if you agree, contact the Mayor and Council.Tell us how property taxes have affected you and any savings or other ideas you have for making Edmonton more competitive for business.

Contact us at policy@edmontonchamber.com

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